Will Crowdfunding Ignite Investing For Profits And Purpose?

Can you earn a healthy return on your investment and help change the world at the same time?

If you haven’t been paying attention, there are already thousands of entrepreneurs and investors betting that you can, with a multibillion-dollar market to show for it.

The companies and investors in this market aim to create “impact” beyond mere profit – whether that be social or environmental impact. But unlike non-profits, revenues and profits sustain these companies.

These for-profit companies, often called “social enterprises,” are becoming more and more common. Among investors, they’re called “impact investments.”

Impact Investing Is Booming

The impact investment market is difficult to quantify since there is no common criteria to define a social enterprise, and no standardized metrics by which to measure impact.

Regardless of where the criteria and metrics eventually land, a recent study from the Calvert Foundation reports that the potential near-term market for sustainable and responsible investing is $650 billion, and that 72% of financial advisors express interest in offering these investment opportunities to clients.

The Forum for Sustainable and Responsible Investment claims that $3.07 trillion of the $25.2 trillion in professionally managed assets consider social impact a key investment criteria.

However you look at the data, we’re talking billions of dollars invested at minimum. And it’s easy to see why…

Consumers want to align their money with their values and are choosing triple-bottom-line brands that support people, the planet, and profit (think: TOMS Shoes, Method, Honest Tea, Patagonia, etc.)

Accordingly, a company with a purpose is becoming increasingly important to investors – rather than just making a quick buck at the expense of society or the environment.

That’s the promise and beauty of social enterprise: making a buck and aligning with your values are no longer mutually exclusive. They’re one in the same.

Crowdfunding As An Impact Investment ‘Accelerator’

Crowdfunding has the potential to ignite impact investing.

How? Well, for starters crowdfunding is inherently social. Founders of companies and potential investors can talk openly on the web and exchange feedback, concerns, and ideas.

More importantly, when it comes to attracting investors, crowdfunding enables founders to bring to bear what’s called “social capital.” Social capital is essentially all the real and potential value stored in the relationships of the founders and the company.

As an example, a powerful and well-connected advisor could alert everyone in her social network about the company’s fundraising with a few taps on the keyboard. If the company has a compelling social mission that would spread well within social networks to begin with, then the reach of the fundraising campaign could be far and wide, all from one well-connected advisor.

The actual quality of the company and the investment opportunity it represents is a separate consideration. But to that point, it’s worth noting that crowdfunding neither “fixes” nor “breaks” investing… it simply brings the process out of the dark and gives offerings more potential transparency, while allowing a new class of “everyday people” to participate as investors as well.

Imagine hundreds of people vetting a company online while it’s about to begin fundraising – combing through the business plan, revenue model, and intended social impact. Bringing the wisdom of the crowd together with standardized criteria for investment return, plus social impact measurements has the potential to create a powerful “next evolution” for investment in social enterprises.

Ultimately, however, only time will tell if crowdfunding can help fund and create more responsible, profitable companies.

Crowdfund Your Way To Profits + Purpose

The crowdfunding investing floodgates will open once the S.E.C. gives its Crowdfunding Rulings. You can’t invest quite yet, but you don’t have to wait to get engaged.

Right now you can go to a crowdfunding platform like crowdfunder, create an investor profile, and start vetting and interacting with real companies and founders. You can support the companies who share your values, you can stay in touch with their latest updates and progress, and you can even contact them and lend a hand if you have ways to add value.

You might not know it, but you have the power to tip the scales for small business owners looking to raise funds and grow their business.

On the other hand, if you own a socially conscious business that needs funding in the future, now is the time to start building your social capital. Create your company profile and start building a network of investors who share your values.

If you’re looking for capital more immediately, you can even join a crowdfunded contest like the up to $500,000 CROWDSTART LV contest that’s backed by Tony Hsieh, the Downtown Project, and the Vegas Tech Fund in particular.

Get engaged now. Tune in, turn on and let your dollars play a part in making the world a better place.

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